In new quarterly projections they issued, Fed officials forecast that stronger growth and stubborn inflation would persist, meaning the central bank’s benchmark interest rate will stay higher for longer.
The Federal Reserve left its benchmark interest rate unchanged Wednesday for the second time in its past three meetings, a sign that it’s moderating its fight against inflation as price pressures have eased.
After the Fed began aggressively raising borrowing costs early last year, most economists predicted it would send the economy crashing as consumers cut spending and businesses slashed jobs and expansion plans.
The president of the Federal Reserve Bank of Boston thinks interest rates will have to rise by more than half a percent this year and stay high to make sure inflation is kept under control.
Most Federal Reserve officials at their last meeting favored reducing the size of their interest rate hikes “soon” – just before raising their benchmark rate by a substantial three-quarters of a point for a fourth straight time.
Federal Reserve officials agreed when they met earlier this month that they may have to raise interest rates to levels that would weaken the economy as part of their drive to curb inflation, which is near a four-decade high.
The Federal Open Market Committee this morning cut the benchmark federal funds rate by half a percentage point in response to concerns the coronavirus outbreak could slow global markets.
Most Federal Reserve officials feel that the three rate cuts they have made this year would be enough unless the economy weakened significantly.
Fed Chairman Jerome Powell said the Fed is likely to keep its benchmark short-term interest rate unchanged in the coming months, unless the economy slows enough to cause policymakers to make a “material reassessment” of their outlook.
While community banks have seen their profits come under pressure this year as the spread between what’s paid on deposits and earned on loans continued to flatten, Wednesday’s decision by the Federal Reserve to cut interest rates for the third time this year could help reverse that trend.
The Federal Reserve cut its benchmark interest rate Wednesday for the third time this year to try to sustain the economic expansion in the face of global threats. But it hinted that it won’t likely cut again this year.
The Federal Reserve finds itself in an unusually delicate spot as it considers how much more to try to stimulate an economy that’s still growing and adding jobs but also appears vulnerable.
The Federal Open Market Committee’s expected rate hike this week, which would likely bring the short-term benchmark rate to a range of 1.25 to 1.5 percent, could not come at a worse time, according to a recent WalletHub study.
Yesterday’s release of meeting minutes from the Federal Open Market Committee’s July 25-26 meeting garnered plenty of headlines due to the dialogue between FOMC members suggesting a rate increase in December may not be as certain as some had initially thought. But smaller banks were not left out of the FOMC’s discussion.
